My latest No Load Fund/ETF Tracker has been posted at:
http://www.successful-investment.com/newsletter-archive.php
The markets rallied sharply with Fed policy remaining accommodative. Our Trend Tracking Index (TTI) for domestic funds moved +5.37 % above its long-term trend line (red) as the chart below shows:
The international index still remains stronger and currently sits +9.88% above its own trend line, as you can see below:
For more details, please see the above link.
The Real Estate Confusion
Lately, a frequently asked question in my advisor practice has been related to real estate.
Last week, the government reported that new homes sales fell 17% last year — the worst decline in 16 years.
However, sector real estate funds/ETfs gained on the day. In fact, the leader of the sector listings in my newsletter, based on a 4wk sorting, was real estate, as you can see from the following table:
The reason for that apparent discrepancy is that most readers look at all real estate as being the same, which is not the case. When you hear reports about a real estate recession or a downturn, so far this has been strictly related to residential property.
All sector real estate mutual funds/ETFs invest in REIT’s, which in turn are exposed to commercial and industrial properties and not residential ones. With the economy humming along just fine, based on the performance of the stock market, commercial real estate has rallied sharply due to higher demand and other factors.
Will this go on forever? Of course not. That’s why, for all of our positions, we have trailing stop loss points set up to protect ourselves from the downside whenever this market reverses its trend.
This may not be in the near future, but you have to be ready to act whenever the facts change.
No Load Fund/ETF Tracker updated through 1/25/2007
The latest No Load Fund/ETF Tracker has been posted at:
http://www.successful-investment.com/newsletter-archive.php
The tug-of-war between bulls and bears continued this week. Our Trend Tracking Index (TTI) for domestic funds remains +4.06% above its long-term trend line (red) as the chart below shows:
The international index still remains stronger and currently sits +8.30% above its own trend line, as you can see below:
For more details, please see the above link.
The Ignorance Game: Index Funds vs. Mutual Funds
The year 2006 has barely come to an end and the battle goes on. Which one has been the better investment? Index funds or actively managed mutual funds?
Standard and Poor’s reported that the S + P 500 index outperformed 69% of actively managed large-cap mutual funds in 2006. Additionally, the S + P SmallCap 600 outperformed almost 64% of actively managed small-cap mutual funds.
The story goes on to say that over the past five years, the S + P 500 index has beaten 71% of managed large-cap funds. The S + P SmallCap 600 has beaten 78% of managed small-cap funds in the same period.
I have no problem with these numbers, since in my advisor practice we use index funds/ETFs as well whenever they make sense in any given economic environment.
However, there is an ignorant part of that story that totally neglects to point out that markets don’t always go up. What will happen during a bear market?
A casual or inexperienced reader of the above figures could easily interpret them as an argument that index funds are the investment for all seasons. This is not the case. When a bear market strikes, such as the during the period of late 2000 to early 2003, index funds, as well as actively managed mutual funds, will go down sharply.
Some of them were pushed to such low levels that it took a Buy + Hold investor over 5 years just to get back to a break even point. What difference does it make that an index fund may be a better investment when you can lose just as much with it when the bear rears its ugly head?
If a bear market has the potential to devastate an investor’s portfolio, shouldn’t the primary emphasis of investing be to try to avoid that scenario, rather then some chest pounding over a couple of percentage points?
That’s my view, what’s yours?
No Load Fund/ETF Tracker updated through 1/19/2007
My latest No Load Fund/ETF Tracker has been posted at:
http://www.successful-investment.com/newsletter-archive.php
Despite sloppy sideways action in the market the upward bias remains. Our Trend Tracking Index (TTI) for domestic funds remains +4.91% above its long-term trend line (red) as the chart below shows:
The international index still remains stronger and currently sits +9.24% above its own trend line, as you can see below:
For more details, please see the above link.
When (NOT) to Buy ETFs
With new ETFs being offered to the public as quickly as sponsors can get regulatory approval, it’s no surprise to see investors jumping at any new offering that comes their way.
Is that really a good idea?
I don’t think so. While there is a need to have as many ETF choices as possible, it doesn’t mean you should buy the latest one just because it is available. If you are following trends, you still need to make sure that the latest ETF is moving in the right direction to help you achieve your investment goals.
Here’s how I look at it in my advisor practice: I will not invest in any ETF which does not have at least a 9 months track record of price data.
Why?
I need that much information to determine where the long-term trend of this ETF is headed. Looking at only a 30-day period, for example, is simply not going to give me any idea about where this ETF has been and where it is at in the bigger scheme of things.
That’s why my Fund Tracker StatSheet contains only 160 ETFs, although there are over 300 being offered today. As they gain price history, I will add them to my data base, if they fall in the categories I am tracking.